The global pandemic seems like it is winding down, and we expect to see a rise in many businesses, notably in the hospitality and service industries. It also means that we’ll see many old and new restaurants taking prime place and doing everything to attract patrons.
So, here I’ll talk about getting a business loan for opening or reopening a restaurant, and I’ll share my selection of the top 5 best online lenders that support restaurants and provide loans for this purpose.
Table of Contents
- 5 Best Restaurant Business Loans at a Glance
- 5 Best Restaurant Business Loans (Updated 2021)
- How We Rate Loans for Restaurants?
- How to Compare and Evaluate Restaurant Financing Options
- Top 8 Ways to Finance a Restaurant Business?
- Types of Restaurant Business Loans
- Common Uses for Restaurant Business Loans
- Applying for a Restaurant Loan
- FAQ – Most Popular Questions Related to Getting a Restaurant Business Loan
- Do Banks Give Loans for Restaurants?
- Is It Hard to Get a Loan for a Restaurant?
- Can I Get a Loan to Buy a Restaurant?
- Can I Get a Restaurant Business Loan With Bad Credit?
- Why Do You Need a Restaurant Business Loan?
- Buy a Restaurant Using a Loan or Opening a New Restaurant?
- What Restaurants Can Use Business Loans?
- Can I Get an SBA Loan for a Restaurant?
Restaurant owners are often more likely to get a business loan from an online lender than they would be via a traditional bank. It is because traditional banks have plenty of terms, conditions, and strict qualifying conditions.
On the other hand, depending on the business model you have in place, you can get the finances you need for your business as fast as 24 hours after applying with some online lenders. However, if your business is a restaurant, then in most cases, you’ll be better suited to get a business line of credit loan instead of the more traditional term loan.
This way, you get more flexibility and can even combine it with an equipment financing loan and get enough finances to cover all operational expenses, rent, and equipment. You need to note that you can use the business line of credit as needed, and you only pay interest on the partial sum you use, not the whole amount.
Here I’ve selected five online lenders that offer good loan options and grant loans to restaurants. Read on for more details on each one, and I’m sure you’ll feel more comfortable looking for financing your restaurant business.
5 Best Restaurant Business Loans at a Glance
#1 – LoanBuilder – Is a part of PayPal, and this online lender provides short-term loans with unambiguous terms and conditions and has relatively low qualifying criteria.
#2 – OnDeck – Is an online loan provider of loans for established businesses. The qualifying criteria are on the higher side, but the other terms and conditions are pretty favorable.
#3- SmartBiz – Is an online loan facilitator, and it enables more accessible access to SBA loans. While the qualifying conditions are higher, the interest rates are pretty low and favorable repayment terms.
#4- Kabbage – The services are excellent, and this online lender is famous for its business line of credit loans, low qualifying criteria, and automated application process.
#5 – Lending Club is a peer-to-peer online lender, and it provides term loans with interesting terms and relatively low qualifying conditions.
I’ve prepared the following comparison table consolidating all the pertinent facts about each of these online lenders:
|Lender||Lowest Rate||Repayment Terms||Loan Amount Min/Max||Loan Requirements|
|LoanBuilder||6.49%||Up to 12 months||$5,000 – $500,000||$42,000 min annual income
9 months in business
550 min credit score
|OnDeck||10.89%||12 – 36 months||$5,000 – $500,000||$100,000 min annual income
3 years in business
600 min credit score
|SmartBiz||4.75%||2 – 25 years||$30,000 – $5,000,000||$100,000 min annual income
2 years in business
640 min credit score
|Kabbage||2.5%||6/12/18 months||$1,000 – $250,000||$50,000 min annual income
12 months in business
No min credit score required
|Lending Club||4.99%||Up to 60 months||$5,000 – $500,000||$50,000 min annual income
12 months in business
600 min credit score
5 Best Restaurant Business Loans (Updated 2021)
LoanBuilder – Easy-to-qualify Terms, Short-Term Loans With Low Rates
LoanBuilder is a part of the PayPal family of financial businesses, so you can often see this loan provider referred to as a PayPal business lender or PayPal business loan. LoanBuilder is a direct lender and provides loans for small and medium businesses, including restaurants.
I’ve opted to put LoanBuilder on the top of this list, as this service offers short-term loans with predetermined rates that fit the needs of many small businesses. The attractiveness of LoanBuilder loans is that it comes with a single fixed fee paid during the lifetime of the loan. There are no origination fees or any other hidden expenses and only a $20 returned item fee.
You can take anywhere from $5,000 to $500,000, the repayment term is up to 12 months, and the loan is approved the next business day. To qualify for a LoanBuilder loan, you need an annual income of over $42,000, at least nine months in business, and a credit score of over 550.
I like and recommend LoanBuilder as a viable option for restaurant loans. This service is among the best online lenders today, with precise requirements, very transparent terms, and no hidden fees.
LoanBuilder is an appropriate option for small business loans, as it has services tailored to fit the needs of emerging and growing businesses. The precise requirements make it perfect for business owners looking for a fast financing option.
OnDeck – Pioneering Online Lender, Streamlined Application
OnDeck is an online loan provider with services suitable for restaurant owners looking to get a term loan with good terms and conditions. OnDeck has a long history in financial services and is a part of OnDeck Capital. OnDeck has an automated application process and offers both term loans and business lines of credit loans.
The term loans are anywhere from $5,000 to $250,000 and have a repayment period of up to 24 months. The business line of credit ranges from $6,000 to $100,000 and has repayment terms of 12 months. To apply for any of the OnDeck loans, you need to meet the primary eligibility criteria like being in business for at least one year, have a personal credit score of 600 and over, have annual revenue of $100,000, and have a business checking account.
I need to note that OnDeck’s automated application process makes this a very appealing online lender. If you get approved for a loan, you get access to your finances quickly, most often within 24 hours.
I would recommend OnDeck as a good option to get a restaurant business loan because of its automated application process, reasonable qualifying conditions, and good terms.
The OnDeck loans are best suited for established businesses in good standing but need a financial boost. The term loans and business line of credit are both good options, and they come with no-hassle terms.
SmartBiz – Get an SBA (7)(a) Loan With Ease
SmartBiz is an online loan facilitator, and it simplifies the obtaining of SBA (7)(a), SBA Commercial Real Estate, and term loans. Unlike the other lenders on the list, the SmartBiz qualifying requirements are higher and stricter, but considering the interest rates and all the other terms, it makes complete sense.
Stats have shown that about 90% of all businesses that applied to SmartBiz for a loan have been approved. Considering the numbers and the streamlined application process, it is better to apply for a restaurant business loan via SmartBiz than via a traditional bank. The loan amounts are between $30,000 and $5,000,000, and the repayment terms are between 2 and 25 years, depending on the type of loan you get.
The qualifying terms are stricter, but the interest rates and repayment terms are much more favorable. To apply for a loan with SmartBiz, you’ll need to be in business for at least two years, have an annual income of $100,000, and have a credit score of at least 640.
SmartBiz is a respectable online loan facilitator, and I like their terms and conditions. I would recommend this service for all restaurant owners looking to get an SBA loan or term loan with bank terms.
SmartBiz is an option for a loan for all established businesses looking for a financing option with long repayment terms, low-interest rates, and high amounts.
Kabbage – Great Option For a Business Line of Credit
Kabbage is among the favorite online lenders, as it provides attractive short-term loans with simple qualifying terms. The Kabbage services are aimed at small and medium businesses so that any restaurant owner could take advantage of the offerings.
The loan option provided by Kabbage is a business line of credit intended for small businesses. The qualifying terms are quite reachable for a wide array of businesses. These include a minimum of $50,000 annual income, 12 months in business, and there is no minimum credit score required.
The amount you can borrow ranges from $1,000 to $250,000, and the repayment terms are 6, 12, and 18 months. It is effortless to apply, as Kabbage has an automated and streamlined application process, with one of the quickest approval times and funding – if you have all the docs ready and fulfill the terms, you can get your loan within 10 minutes.
Kabbage is among the best online lenders at this time. As such, I would recommend it for its streamlined application process, good funding options, and upfront terms. The only downside is the higher rate, which comes with the fast service.
Kabbage is best suited for small businesses with poor credit scores, as the qualifying conditions don’t require this condition. Instead, Kabbage looks at cash flow statements and offers good financing options like business lines of credit for restaurant owners and similar businesses.
Lending Club – Peer-to-peer Lender, Good Option For New Businesses
Lending Club is a part of Facebook’s services, and it is not like the other online financial services on this list. Lending Club is an online lending marketplace, also known as a peer-to-peer lending place. The platform connects borrowers with investors and analyzes loan applications.
The funds are then appointed by Accion Opportunity Fund, the Lending Club partner. The loans by Lending Club come with repayment terms of one to five years. The loan amount is $5,000 up to $500,000, with fixed interest rates and a fixed monthly repayment schedule.
Lending Club’s terms and conditions state that there are no prepayment penalties. It could be convenient for many businesses like restaurant businesses and similar ones to get a lump sum and pay off the entire loan early. To apply for a term loan with Lending Club, you will need an annual income of $50,000, a business history of at least 12 months, and a credit score of at least 600.
I would recommend Lending Club as a financing option for micro-business owners or sole proprietorships that need a micro-loan. Small restaurant owners could benefit from such loans, as the terms are fair and qualifying conditions are reasonable.
Lending Club made dramatic changes to its practices in 2019. That is why this online lender’s services are best suited for personal loans and loans for small businesses, sole proprietorships, and freelancers.
How We Rate Loans for Restaurants?
To find the best option for restaurant owners looking to get a suitable loan, I’ve used the following criteria:
- Transparency of terms and conditions
- Interest rates and repayment terms
- Type of loans offered
- The complexity of the application process
- Qualifying requirements
- Customer service and expert loan advisors help
How to Compare and Evaluate Restaurant Financing Options
Here is what you need to know before you apply for a business loan to improve the financial situation of your restaurant business:
- Evaluate the amount you will get
- Evaluate and calculate the total amount you need to pay back
- Consider how fast the loan gets approved
- Learn all the variable interest rates and how they change over time
- Read the fine print – collateral, terms, conditions
- Evaluate the reputation of the lender
Top 8 Ways to Finance a Restaurant Business?
Here are the top financing options for restaurant owners:
- Equipment financing – with this loan, you can buy the equipment to improve your restaurant or make any large equipment purchases.
- SBA loan – this loan is not as much as a funding option, but it provides a safety net for borrowers to get a loan from another lender.
- A business line of credit – a type of loan that can be handy, as you can use it at your discretion, and use as much of it as you need, and only pay interest on the amount you use.
- Startup business loan – this is a loan you can take before you open a restaurant, as you don’t need to have a business to qualify, and you can use it to build your business.
- Invoice factoring – this type of loan is interesting for restaurant owners who are dealing with slow-paying accounts. The lenders provide a lump sum of about 80% of the invoice value, and they then collect the money from the original owners. It is beneficial for restaurants that rent out their space and get late payments.
- Unsecured business loan – the unsecured loan does not require any collateral, and it is usually followed by a more significant risk and higher interest rates.
- Commercial vehicle loan – it is not exactly a friendly loan for conventional restaurants, but it is a perfect option for catering businesses, food trucks, and food delivery services.
- Merchant Cash Advance – this is the last resort when it comes to restaurant financing. The MCA is paid back with a percentage from future credit/debit card transactions, and the repayment terms last until the whole loan is paid off.
Types of Restaurant Business Loans
Small business loans
- Term loan – the term loan and is the most common type of loan used to cover everyday expenses included in running a company. These come with a higher interest rate, require stricter qualifying criteria, and often require collateral.
- Line of credit – the most flexible type of loan, as you can use only the amount you need and pay interest on the used funds. The business line of credit is known as a revolving account; many of these don’t require a personal guarantee.
Equipment Financing and Leasing
This type of loan is intended for buying equipment and inventory for a business. When we talk about restaurants, an inventory/equipment financing loan is an excellent option to get all the necessary things to start your business and build a quality offering.
Common Uses for Restaurant Business Loans
- Start a new restaurant business
- Renovate an existing location
- Invest in new equipment
- Open a new location
- Change layout/add more tables
- Hire additional staff
- Rebrand and improve your offer
- Diversify your offer with new goods
- Offer catering/packaged goods
Applying for a Restaurant Loan
The process of applying for a small business loan as a restaurant owner is similar to any other small business loan. Often, restaurant owners tend to have tight profit margins, making it more difficult for them to get financing. So, it is wise to go the extra mile and prepare your loan application. Thus, before you go and apply for a loan, here is what you need to consider:
- Ensure you have a credit score of at least 600, preferably 680.
- Ensure you have annual revenue of at least $100,000.
- Ensure all your legal and financial documents are in order.
These are the basics. To increase your credit score, the most important thing you can do is pay all of your bills on time and ensure you don’t max out your credit cards. Your rating will rise with time as long as you are responsible for the repayment schedule.
Getting a small business loan for a restaurant is actually the same as any other small business application. In the hospitality business, restaurants need a lot of capital to stay on top of their game. Many times, there are other factors at play that are difficult to predict. However, there are many financing options to consider, as I’ve covered here. You can consider all the online lenders above, as these provide good loan opportunities that you can use for financing your restaurant.
- Best Overall: LoanBuilder
- Runner-Up for Best Overall: Kabbage
- Best for Interest Rates: SmartBiz
- Best for Equipment Financing: OnDeck
- Best for Advertising a Restaurant: LoanBuilder
- Best for Renovation: Lending Club
- Best For Paying Employees: Kabbage
Do Banks Give Loans for Restaurants?
As the effects of the global pandemic are winding down, many banks are starting to give loans to restaurant owners. That said, the rules and qualifying terms are much stricter than before, so you should consider looking at online lenders as an alternative source of funding.
Is It Hard to Get a Loan for a Restaurant?
Yes, it isn’t easy to get a loan for a restaurant, as the lenders still consider the hospitality industry quite risky. If you have a loan backed by the SBA, then you are more likely to get another loan for a restaurant, as the SBA loan serves as an assurance that your request is legitimate.
Can I Get a Loan to Buy a Restaurant?
If you want to buy a restaurant, the best option is to apply for a startup business loan. All the lenders I’ve covered above offer loans for established businesses, so you need to look to other sources for financing.
Can I Get a Restaurant Business Loan With Bad Credit?
Yes, it is possible to get a business loan for your restaurant even if you have bad credit; you only need to know where to look. To learn more on this, you should check out this article where all the essential info on getting a loan with bad credit is covered in detail.
Why Do You Need a Restaurant Business Loan?
There are many uses for which you can use your restaurant loan: from buying hew equipment, buying inventory, paying salaries, expanding the offer, buying ingredients, paying bills, and much more.
Buy a Restaurant Using a Loan or Opening a New Restaurant?
It is an entirely personal choice. If you already have experience, then you can open a new restaurant. Still, for this, you’ll have to apply for a different type of loan, namely a startup business plan, or use other financing channels like crowdfunding and more.
What Restaurants Can Use Business Loans?
A lot of restaurants can use business loans. However, the ones that can benefit from a business loan are the restaurants that need upgrading, new equipment, refurbishing/renovating, and similar things.
Can I Get an SBA Loan for a Restaurant?
Yes, you can. If you fulfill the qualifying conditions, getting an SBA (7)(a) loan is among the best options. The SBA (7)(a) is a commercial loan that helps small businesses with many expenses, including real estate, working capital, or equipment.